Microsoft on Tuesday publicly demonstrated Windows 7 for the first time, showing off a new OS feature that will allow users of the upcoming system to control touch screen-based PCs with their fingers. A simplified version of this feature actually exists in Windows Vista today, but Windows 7 will take this functionality to the next level by providing multi-touch capabilities that will work everywhere in the system.

According to Microsoft, touch displays are just part of a movement to evolve how we interact with PCs. "Today almost all [PC] interaction is keyboard-mouse," Microsoft chairman Bill Gates says. "Over years to come, the role of speech, vision, ink--all of those--will be huge."

Demonstrating Windows 7's multi-touch controls, Microsoft corporate vice president Julie Larson-Green showed an electronic version of finger painting called Touchable as well as touch-enable photo organization and mapping applications. She also showed off a virtual piano that played music as she tapped the onscreen keys.

Microsoft isn't alone in its pursuit of multi-touch controls. Apple's vaunted but slow-selling iPhone utilizes multi-touch controls, and a selection of newer MacBook Pro laptops offers limited multi-touch capabilities in certain Mac OS X applications. For Microsoft, however, Windows 7 multi-touch is a chance to leapfrog the competition, and it builds on work the company pioneered in earlier versions of Windows and in its Surface smart table. And as Microsoft CEO Steve Ballmer notes, while Apple gets a lot of press for its work, that company plays in a much smaller market. "We'll sell 290 million PCs this year and Apple will sell 10 million PCs," he said in a "do the math" moment. "They're fantastically successful, but so are we."

Microsoft has been very careful to not reveal too much information about Windows 7 because of the debacle that occurred after it over-promised on Windows Vista and then repeatedly delayed the product, all while paring down the feature-set over time. Despite rumors, however, Vista continues to outsell its predecessors, both with consumers and businesses. Yesterday, Microsoft announced that it has sold over 150 million licenses to the OS since it first appeared in late November 2006.

For years Microsoft has been investing in many forms of natural input in order to simplify the way people interact with their PC's and devices. The advent of the original Windows graphical user interface forever changed the way people used their PC's. Today, advances in pen and handwriting technology in Windows Vista offers students a natural and intuitive way to capture searchable notes and diagrams in the classroom. Others are using this technology to quietly capture pen based notes during meetings. Speech recognition, something which was once considered science fiction, is enabling many Windows Vista users to see, hear, and use their computers for the very first time.

Touch is quickly becoming a common way of directly interacting with software and devices. Touch-enabled surfaces are popping up everywhere including laptop touch pads, cell phones, remote controls, GPS devices, and more. What becomes even more compelling is when this experience is delivered to the PC -on a wide variety of Windows notebooks, in all-in-one PC's, as well as in external monitors. In working with our broad ecosystem of hardware and software manufactures, we're excited to be showing some of the great work and investments we are working on in Windows 7.

Tonight, Julie Larson-Green showed how a few of the multi-touch innovations first previewed in Surface will ultimately enhance the next version of Windows. A transcript of the demo can be found here: http://d6.allthingsd.com/20080527/gates_ballmer/.

Below is an abridged version of the demo that Julie delivered this evening. Please note, the applications you will see are for demonstration purposes only...but it's all Windows 7 underneath.